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THE J. M. SMUCKER COMPANY TO ACQUIRE AINSWORTH PET NUTRITION
Source: The J. M. Smucker Company news release

Orrville, Ohio --

The J. M. Smucker Company has announced the signing of a definitive agreement to acquire Ainsworth Pet Nutrition, LLC in a transaction valued at approximately $1.7 billion, after an estimated tax benefit of $200 million. The Company also announced today it will explore strategic options for its U.S. baking business, including a potential sale.

Ainsworth is a leading producer, distributor, and marketer of premium pet food and pet snacks, predominately within the United States. Approximately two-thirds of Ainsworth's sales are generated by its Rachael Ray Nutrish brand, which is driving significant growth in the premium pet food category. Ainsworth also sells pet food and pet snacks under several additional branded and private label trademarks.

"Ainsworth Pet Nutrition is an excellent strategic fit for our Company, as the Rachael Ray Nutrish brand adds another high-growth, on-trend brand to our pet food portfolio," said Mark Smucker, Chief Executive Officer. "Their team has done a tremendous job growing this business, building Nutrish into one of the most recognizable premium pet food brands in the United States. We look forward to working with the talented Ainsworth team, as we know their passion for pets runs as deep as ours."

"Smucker's decision to acquire Ainsworth Pet Nutrition validates the power of the Ainsworth company mission," said Jeff Watters, President & CEO of Ainsworth. "At Ainsworth, our goal has been to improve the lives of pet families everywhere by making high quality pet food accessible to all pet parents. This single-minded focus has resonated with consumers and will continue to resonate under Smucker leadership."

"After five generations, our family, in partnership with L Catterton, made the decision to sell Ainsworth Pet Nutrition to The J. M. Smucker Company," said Sean Lang, Executive Chairman of Ainsworth. "We took great care to find the right home for our brands and our people, to whom we are so grateful. The J. M. Smucker Company, also a fifth-generation family company, is led by a like-minded family to our own. We expect the combined horsepower of these pet care organizations to achieve great things."

"It has been an important goal of mine to help create pet food with the same care I use when creating my recipes, as well as a brand that has been able to donate over $27 million to help animals in need," said Rachael Ray. "So I am pleased that The J. M. Smucker Company is committed not only to maintaining the high quality of the Nutrish brand, but continuing the philanthropic efforts of the brand through donations to The Rachael Ray Foundation, which helps those animals that are less fortunate than our own."

The Company anticipates the acquired business to contribute net sales of approximately $800 million in the first full year after closing the transaction.

Annual cost synergies of approximately $55 million are expected to be fully realized within three years after closing, with approximately $25 million anticipated in the first year. After giving effect to the first year of synergies, the Company expects the acquired business to generate earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $110 million in the first full year after closing the transaction, excluding one-time costs, and contribute approximately $0.25 of accretion to the Company's adjusted earnings per share.

The all-cash transaction, which the Company will fund with debt, is valued at $1.9 billion, prior to an expected tax benefit related to the acquisition with a present value of approximately $200 million. After factoring in the estimated tax benefit and anticipated annual cost synergies of $55 million, the purchase price represents a multiple of approximately 12 times EBITDA.

Ainsworth is a privately-held company headquartered in Meadville, Pennsylvania. In addition to its headquarters, the transaction includes two manufacturing facilities owned by Ainsworth, which are located in Meadville, Pennsylvania and Frontenac, Kansas, and a leased distribution facility in Greenville, Pennsylvania. The Company anticipates that over 700 Ainsworth employees will join the Company in conjunction with the transaction. Ainsworth operates two additional manufacturing facilities that are primarily used to provide contract manufacturing services to third-party pet food distributors. Those facilities and the associated business are not included in this transaction.

The Company expects to incur approximately $50 million in one-time costs related to the acquisition, the majority of which are expected to be cash charges. Approximately two-thirds of the one-time costs are expected to be recognized in the first year after the closing of the transaction.
The transaction is expected to close early in the Company's fiscal year beginning May 1, 2018, subject to customary closing conditions including receipt of required regulatory approvals.